The Czech government has proposed increasing tobacco taxation and introducing a tax on e-cigarettes as part of its consolidation package. The proposal calls for a 10% increase in tobacco consumption tax next year, followed by annual increases of 5% until 2027. Heated tobacco products would see a 15% increase next year, with the same growth rate until 2027. The changes are expected to raise the price of a pack of cigarettes by at least CZK8-9 ($0.36-$0.40) and heated tobacco products by CZK3-4. The final price, however, will depend on individual manufacturers, according to JTI International spokesperson Jiří Sochor.
This move comes after the government raised taxes on tobacco products last year, leading to a minimum increase of CZK4 ($0.18) per pack of cigarettes. Last year, the tobacco tax revenue fell short of the state’s expectations. The proposed new tax on e-cigarettes would follow the European Tobacco Directive, which regulates these products.
The government aims to increase the revenue generated from the tobacco tax, which was CZK56.22bn ($2.47bn) in 2021 and CZK59.35bn ($2.61bn) in 2022. The new taxation proposal could generate more revenue by levying a tax on e-cigarettes and increasing the tax on traditional tobacco products.
JTI International spokesperson Sochor believes the government’s plan is ambitious, given that tobacco tax revenue has stagnated or declined recently. He said that this has led to a significant reduction in the volume of cigarettes sold to consumers in Germany, bringing Czech cigarette prices closer to German prices. Four years ago, German consumers bought one-third of cigarettes sold in the Czech Republic, while today, that figure has fallen to just 10%.
Sochor also pointed out the differences between the Czech Republic and Poland, where cigarettes are cheaper at CZK50 ($2.19). Last year, Polish cigarettes accounted for more than 4% of Czech consumption, a growth of 40% compared to the previous year. This suggests that the price difference between Czech and Polish tobacco products could lead to a rise in cigarette smuggling.
The proposed taxation measures aim to generate more revenue and reduce the number of smokers in the Czech Republic. The government has set a target to reduce the number of smokers in the country from 20% to 15% by 2025. In addition to the tax increase, the government plans to spend CZK100m ($4.39m) on anti-smoking campaigns.
The Czech Republic is not the only country to increase tobacco taxes. Governments have recently raised tobacco taxes to discourage smoking, the leading cause of preventable death worldwide. In addition to reducing smoking rates, higher taxes can help governments generate more revenue and reduce the economic burden of tobacco-related illnesses.